Dominick's parent misses estimates, shares fall

A shopper fills his cart at a Dominick's at 87th Street and Cicero Avenue in a 2006 file photo. (Michael Tercha/Tribune)

Stock in the the parent of Dominick's supermarkets fell as much at 20 percent Thursday after first-quarter sales at the grocery chain missed forecasts.

Still, Safeway Inc., which also operates Safeway and Vons stores, said it gained market share in the quarter and profit rose, aided by tax benefits, but investors focused on sales, which appear to have weakened as the quarter progressed.

Same-store sales, which include results from established supermarkets that have not been replaced or significantly renovated, rose just 1.5 percent.

Citi analyst Deborah Weinswig said she and others had been expecting an increase of 2 percent.

Safeway earned $118.9 million, or 49 cents per share, in the quarter, ended March 23, up from $72.9 million, or 27 cents per share, a year earlier.

Excluding tax benefits, it earned 35 cents per share. Safeway said it recognized tax benefits of 14 cents per share in the quarter, double what it had expected.

The company has been working to attract customers and boost sales amid tough competition from traditional grocers such as Kroger Co. and discount retailers ranging from Wal-Mart Stores Inc., the largest food retailer in the United States, to dollar stores.

Safeway's sales recently have been boosted by the expansion of a discount program called "Just for U" and fuel discount partnerships with service station operators such as Chevron and ExxonMobil.

But sales fell in the first quarter, to $9.994 billion from $10 billion a year earlier, while analysts were looking for a rise to $10.16 billion, according to Thomson Reuters I/B/E/S. Safeway attributed some of the sales decline to its 2012 sale of Genuardi's stores and said it had lower fuel sales in 2013.

Safeway this month took its Blackhawk Network Holdings Inc. gift card unit public and will continue to exercise full control over the company it created in 2001.

Blackhawk priced its IPO of 10 million Class A shares at $23 per share, above its expected price range, raising about $230 million.

The company said the 7 cents of unanticipated tax benefits in the first quarter roughly offset the expected reduction in its earnings from the Blackhawk IPO.

Safeway stood by its previous forecast for full-year earnings of $2.25 to $2.45 per share.

The company said it still expects identical-store sales, excluding fuel, to rise 2 percent to 3 percent this year.

Safeway shares were down 15 percent, to $24.01 in mid-morning trading.